The Latest from ATQ

Now that we are in a New Year, it’s apparent that both government and opposition are already thinking about the next election, and starting to make policy announcements and commitments.  For those of us who are focused on the world of government commissioning and contracting, one of the intriguing aspects of the next election is what an incoming government (if different) will do about this government’s major contracts for the delivery of public services.

Contracts which straddle governments are nothing new, of course, but what has changed is the type of contracts and the extent to which they impinge directly on policy.  While the outsourcing of any service can be controversial, in general few people tend to get too worked up these days about a contract for the delivery of back office support processes or information technology.  A new government will almost certainly continue such contracts largely unchanged, at least until the contract ends or reaches a suitable break point.

But in recent years, we have started to see governments use the private and third sectors to deliver social policies which a new government may want to change radically, or discontinue altogether.  The two obvious and large areas where this may be the case in 2015 are employability support and offender rehabilitation.  A brief look at both these areas shows some of the tricky dilemmas that are likely to arise for both the current government and the opposition.

To take employability first, the use of external contractors to deliver policy in this area is long established, and we have already seen what can happen to contracts after a change of government.  When the new government entered power in May 2010, it implemented the Conservative’s proposals for the Work Programme.  Since this was effectively an extension – to more client groups and with a larger role for external providers – of the Labour government’s Flexible New Deal (FnD), the policy was in the same “direction of travel”, as the saying goes.  But even so, all the existing contracts had to be terminated and an entirely new procurement process started.  So there was a significant cost – in both time and money – to put in place a very similar set of policy tools.

Since then the Work Programme has been heavily criticised by the opposition, and it can hardly leave it in place and untouched if elected.  But the cost of contract termination means that it may well continue the Programme at least until current contracts expire in March 2016 – although it will need to make clear its intentions well before that.

Offender rehabilitation is different, because there is no cross-party history of using external providers in this sector on a large scale.  The previous government dabbled in this area, but had little in place by way of contracted out provision.  In opposition the Labour Party seems to be broadly in favour of policies to reduce reoffending and rehabilitate offenders, but is strongly opposed to the means this government has adopted to achieve it, through its Transforming Rehabilitation proposals, which involve a mixed economy of public, private and voluntary sector provision that effectively outsources much of the current Probation Service.

So both government and opposition have big challenges ahead.  The government plans to have Transforming Rehabilitation contracts in place by April 2015, and knows that, with the next election fixed for May of the same year, it cannot afford any delay.  If contracts are not in place, it will be easier (though by no means painless) for a new government to reverse or significantly modify the policy.

However the opposition also has difficult issues to wrestle with.  If the government does meet its timetable, new Labour Ministers will have to decide whether they want to incur another large bill for contract termination, or can live with and try to modify the contracts to meet their policy objectives.  And as the election looms Labour will come under pressure to set out clearly what its policy is in this area – in a way that it probably would not have to do if private and third sector providers – and their investors – were not gearing up to deliver services.

In the longer term and if (as seems likely) the use of external providers in complex policy areas continues and grows, there are some bigger questions for government as a whole about how we avoid undermining the democratic process.  Politicians will rightly complain if their ability to change policy which is contentious is unduly constrained by the decisions of predecessors effectively to outsource delivery of said policy.  But those who are being asked to invest heavily in new provision – whether as providers or financiers – will be very reluctant to do so if there is no guarantee of continuity beyond each election cycle.  Some may say of the latter “so be it and good riddance” but most will not.

What may happen is one of two things, or possibly both.  First, more contracts will be awarded that are coterminous with general elections – something made easier if we stick with fixed five year terms. The second is that all parties will have to seek broader consensus on policy and the means to deliver it, before major programmes of service delivery outside the public sector are implemented.  This may be no bad thing, and has some precedent in our approach to major infrastructure projects, such as the 2012 Olympics and, more recently, HS2.  However since some in the Labour Party have been making noises about withdrawing support for HS2, a project which they first proposed, the auguries for the development of such consensus may not be that encouraging.